Some innovations, like e-commerce and the cloud, are so big they will take a few years to play out. The businesses that create the very best investment returns can tap into that growth and ride it for a long time.
It’s still early, nevertheless it looks like artificial intelligence (AI) is the following great tech frontier. Three Fools combed through the technology sector to discover Amazon (NASDAQ: AMZN), Palantir Technologies (NYSE: PLTR), and Snowflake (NYSE: SNOW) as crucial roleplayers that can support AI’s broader growth moving forward.
The perfect news? You do not need much money to make big returns over the long run. Investing $2,000 in any (or all) of those could repay well over the following 25 years.
Here’s what you could know.
Amazon shall be the muse for a lot of AI’s innovations
Justin Pope (Amazon): Training AI models requires tremendous computing power to crunch through vast data quickly. That is where Amazon is poised to affect AI’s growth over the approaching years. Amazon Web Services (AWS) is the world’s largest cloud platform, and Amazon is aggressively adding tools and services to assist developers construct AI on it.
AWS is bringing in-house-designed chips to its platform this yr, including the Graviton4 processing chip for general computing loads and the Trainium2 designed for AI applications. Moreover, AWS will deploy Nvidia‘s next-generation H200 AI chip and over 16,000 GH200 Grace Hopper Superchips intended for essentially the most extensive AI applications.
Do not get me flawed. The cloud is a competitive field with other deep-pocketed players, including Microsoft with Azure and Alphabet with Google Cloud, nipping at Amazon’s heels.
In accordance with research by Fortune Business Insights, the worldwide cloud computing market could grow 20% annually to $2.4 trillion by 2030. So, the dimensions of the chance needs to be enough for everybody, and AWS has maintained a market share lead for years.
Until Amazon is knocked off its lead, the stock is a must-own for long-term growth investors.
Palantir delivers one other bumper quarter as organizations race to adopt its technology
Jake Lerch (Palantir Technologies): My pick is Palantir Technologies. When I believe of AI stocks I would like to own for 25 years, I would like an organization with plenty of room to grow. And Palantir definitely matches the bill.
Incorporated in 2003, the corporate debuted on the Recent York Stock Exchange via an initial public offering (IPO) in 2020. Since then, shares have greater than doubled. Yet, at around $22/share as of this writing, they’re still appealing to those investors preferring low-priced stocks.
At any rate, Palantir’s real value is in its product: an AI-driven big data evaluation platform that helps organizations sift through enormous data sets. And judging by its latest earnings results, customers are racing to enroll.
As of its most up-to-date quarter (the three months ending Dec. 31, 2023), Palantir’s customer count grew 35% from a yr ago. Moreover, quarterly revenue increased to $608 million, a rise of 20% yr over yr, and net income rose to $209 million.
The positive earnings are of particular interest, as CEO Alex Karp identified in his annual letter to shareholders:
“In Q4 2023, we generated a profit of $93 million, cemeting our fifth consecutive profitable quarter and making 2023 our first profitable yr since our founding. Consequently, we proceed to be eligible for inclusion within the S&P 500.”
Briefly, it’s quite likely that Palantir shall be added to the S&P 500 sometime soon. With a market cap of $45 billion, the corporate is already roughly the identical size as iconic American firms like General Motors and Kraft Heinz.
And that might provide a further boost to an organization already racing to recent heights.
This data cloud company leaves its mega-tech competitors out within the cold
Will Healy (Snowflake): At first glance, it could seem like the worst time to purchase Snowflake. At a price-to-sales (P/S) ratio of 27, even some growth investors may perceive it as priced for perfection.
Nonetheless, despite Snowflake’s expensive sales multiple, its valuation just isn’t far above its record low. So compelling is that this value proposition that Warren Buffett’s Berkshire Hathaway, a typically risk-averse investment group, was a pre-IPO investor and continues to carry a position.
Snowflake’s data cloud manages, stores, and secures data within the cloud. It has a competitive advantage as it might work with data sets no matter an organization’s cloud provider. That edge has Amazon promoting Snowflake, although it offers its own data cloud product.
Furthermore, it released Snowflake Cortex last yr to construct AI applications quickly and simply throughout the platform. Cortex also utilizes machine learning for forecasting and detecting anomalies, functions that help its customers increase efficiency.
Moreover, customers pay for Snowflake by the quantity of usage. Thus, the more clients utilize the product, the more revenue the corporate earns.
Consequently, long-term clients increased spending on the platform by 35% during the last yr. Also, the $2 billion in reported revenue in the primary nine months of fiscal 2024 (ended Oct. 31, 2023) increased 38% versus the identical period in fiscal 2023.
Moreover, Snowflake holds the potential to take care of or possibly increase that growth rate for a while to come back. Its customer base exceeded 8,900 customers as of the tip of fiscal Q3, a yearly increase of 24%. Furthermore, the cohort of consumers spending over $1 million per yr rose 52% to 436, a testament to the platform’s rising popularity.
Considering the shopper growth and rising spending on the platform, today’s valuation should hold minimal importance as Snowflake consolidates its leadership throughout the data cloud. For investors who intend to carry the stock for 25 years, such positioning could lead on to massive returns on one’s $2,000 investment.
Do you have to invest $1,000 in Amazon right away?
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Idiot’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Idiot’s board of directors. Jake Lerch has positions in Alphabet, Amazon, and Nvidia. Justin Pope has no position in any of the stocks mentioned. Will Healy has positions in Berkshire Hathaway, Palantir Technologies, and Snowflake. The Motley Idiot has positions in and recommends Alphabet, Amazon, Berkshire Hathaway, Microsoft, Nvidia, Palantir Technologies, and Snowflake. The Motley Idiot recommends General Motors and Kraft Heinz and recommends the next options: long January 2025 $25 calls on General Motors. The Motley Idiot has a disclosure policy.
3 Artificial Intelligence (AI) Stocks to Buy With $2,000 and Hold for 25 Years was originally published by The Motley Idiot